Dollar gains, tech equities sell-off, “no-deal” Brexit concerns
Acting as a safe-haven, the dollar is broadly higher amid a global sell-off in tech stocks, the deteriorating US-China relationship and threats by UK Prime Minister Boris Johnson that he “won’t back down” over key issues in UK-EU post-Brexit trade talks. The tech-heavy NASDAQ index is poised to open lower by 1.25% following weekend news that Softbank, a Japanese multinational holding company, was behind massive bets on higher tech share prices. Lastly, President Trump said he plans to curtail America’s economic ties to China. US 10-yr Treasury yields fell 3 bps to 0.67%, and WTI oil dropped $2.20 to $37.60 per barrel.
Tuesday: US Small Business Optimism Index (August), Consumer Credit (July), Eurozone GDP
Wednesday: US Job Openings and Labor Turnover Survey (JOLTS) (July), Bank of Canada announces monetary policy decision
Thursday: US PPI (August), Initial Jobless Claims (Sep 5), Continuing Claims (Aug 29), European Central Bank meeting
Friday: US CPI (August), Real Avg Hourly Earnings YoY (August)
September 8, 2020
EUR/USD 1.1776 GBP/USD 1.3026 USD/CAD 1.3193 AUD/USD 0.7222 USD/JPY 106.01 USD/CNH 6.8466 USD/ILS 3.3934 USD/MXN 21.7946 USD/CHF 0.9181 USD/INR 73.60
The dollar is stronger across the board amid a risk-off mood in the markets. Nervous investors are selling tech stocks this morning following weekend news that Softbank purchased a massive amount of equity derivatives in stocks like Microsoft, Facebook and Tesla, which helped fuel the equity rally over the last few months. Additional uncertainty was created when President Trump said he plans to curtail America’s economic reliance on China. Trump also threatened to penalize US firms that generate jobs overseas and to prevent firms that do business with China from winning federal contracts.GBP
The UK pound is lower by over 1% after Prime Minister Boris Johnson promised that he “won’t back down” on several key issues with the post-Brexit trade talks with the EU, leading to increased odds of a no-deal Brexit.EUR
The euro is slightly lower on broad dollar strength. Eurozone GDP released this morning of -11.8% QoQ was better than -12.1% expected. Traders await tomorrow’s ECB meeting, where no change is expected in rates. However, interest will be on the ECB’s reaction to declining inflation rates and potentially more action to contain Covid-19.CAD
The Canadian dollar fell by 0.6% versus the US dollar over the weekend amid the broad risk-off mood. Traders await tomorrow’s Bank of Canada meeting, when rates are expected to be held at 0.25%.ASIA/PACIFIC
The Chinese yuan moved little overnight despite pressure on US-China relations. Interestingly, Chinese and other Asian equity markets made slight gains on the day.
Acting as a safe-haven currency, the Japanese yen was the only foreign currency that gained against the dollar over the weekend.
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